PENSIONS, LABOR = HIGHER WATER COSTS

Taxpayers group examined 15 districts; its report cites role both play in rising rates

Increasing pension and labor costs play a role in San Diego residents’ rising water bills, officials with the San Diego County Taxpayers Association said in a report released Tuesday.

The 56-page report examined the cost of labor at the county’s 15 independent water districts between 1999 and 2010.

The report acknowledges that larger issues play a major role in the increases the average consumer sees — wholesale water prices, billions of dollars of debt-financed capital projects and the unintended consequences of conservation efforts.

Taxpayers Association officials, however, said that water agencies also have to keep rates artificially high to pay for labor costs and the rising costs of pension and retiree health care benefits, which at some agencies either doubled or tripled during that period.

The taxpayers association, through its research arm, makes several recommendations, including calling on districts where employees receive Social Security benefits to reduce their pension formulas for new hires and require employees to pay their full share of pension costs and retiree health care.

“When ratepayers give districts grief over rising water rates, the districts point the finger at rising wholesale costs as the culprit,” said Lani Lutar, the taxpayer association president at CEO. “But pension and retiree health care obligations also have significant impact on the rates, an impact these districts should be taking more aggressive measures to bring under control.”

Retail water agencies are different from many other public agencies because a smaller percentage of budgets go to labor costs — the bulk of the costs come from purchasing water. A survey by The Watchdog last year showed that labor comprises about 25 percent of district costs, on average, whereas in other agencies such as cities and schools, labor costs make up upward of 85 percent of the budget.

One of the agencies highlighted in the report is the Yuima Water District, which serves about 2,000 people in Pauma Valley. According to the report, Yuima’s labor costs increased by 122 percent over 10 years, the highest of the 15 districts. With 11 employees, the district’s cost per full-time employee was $183,000, also the highest of the agencies.

Most districts, the report says, pay most — if not all — of the employee’s retirement contributions.

In a two-page email response, Yuima’s general manager Linden Burzell defended his district’s per-employee costs, which he said were going to be higher than larger districts because they don’t have lower-paid subordinates. Burzell cites the district’s one-man finance team as an example.

“Similarly, the District employs a Director of Finance, whose qualifications are, and must be, at least as high as that of the finance director of the largest district, because the District is held to the same legal and financial management standards as any other district, large or small,” Burzell said in the email. “However, unlike a large district, we have no Assistant or Deputy Director of Finance with lesser skills to assist her.

“If we did, the lower wages paid to such assistants would again drive down the average labor cost per employee, even as it increased the total amount of wages paid to accomplish the accounting function,” he said.

Burzell said that his agency now only has nine employees as opposed to the 11 cited in the report, and has taken several steps to drive down costs, including requiring employees to pay their full share of pension costs and ending retiree health care benefits for future hires.

“We have not hired a new employee in seven years, and have no expectation of hiring anybody any time soon,” he said.

Taxpayers association officials acknowledge in the report that several agencies have taken steps to cut costs and pension obligations in the years following the period examined.

Helix, Padre Dam and Valley Municipal Water Districts have begun making their employees pay a certain percentage of those pension costs. Vista Irrigation District has reduced its pension formula, which will result in lower future pension obligations.